Pension timebomb – latest figures

The latest stats from Eurostat show that deaths are projected to outnumber births in the EU27 from 2015.

From 2015 onwards deaths would outnumber births, and hence population growth due to natural increase would cease. From this point onwards, positive net migration would be the only population growth factor. However, from 2035 this positive net migration would no longer counterbalance the negative natural change, and the population is projected to begin to fall.

From 2015, deaths projected to outnumber births in the EU27, Eurostat News Release, 26.09.2008

At first this might seem like good news to those of us who feel the planet is already pretty crowded but a closer look reveals this:

The EU27 population is also projected to continue to grow older, with the share of the population aged 65 years and over rising from 17.1% in 2008 to 30.0% in 2060, and those aged 80 and over rising from 4.4% to 12.1% over the same period.

So this is where the pension timebomb comes in.  If the population is ageing and everybody wants to retire while they still have the ability to enjoy themselves and be active, who is going to work to support them?

In consequence, the old age dependency ratio in the EU27, i.e. the population aged 65 years and older divided by the working age population, is projected to increase from 25% in 2008 to 53% in 2060. In other words, there would be only two persons of working age for every person aged 65 or more in 2060, compared with four persons to one today.

The numbers just don’t add up.  In fact, even if the birth rates were predicted to grow enough to keep the ratio at 1 to 4 we would soon reach unmanageable population levels anyway.  We can’t keep living longer without consequences.  I’m not saying we shouldn’t live longer, just that we need some radical change if we are to support an ageing population.  In the UK, state pensions are already pathetic and force many to live out their retirement without the money to feed and heat themselves properly.

At the moment, the only way to avoid poverty in retirement is to assume that the state pension will be worthless by the time you retire and invest now to cover your own retirement needs in full.  Anything less is liable to lead to severe disappointment.

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